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Recent data on new US home sales showed a big surprise to the upside, according to Saxo Bank head of equity strategy Peter Garnry.
New US home sales have reached their highest level in 9 years but this is still below the natural rate.
Garnry believes that the robust employment trend could spell a continuation of the US housing boom. And this trend could prove positive for companies like Home Depot and Toll Brothers.
Garnry is positive on Toll Brothers and his trade idea is to go long with a target of $40 and a stop at $30.

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The US housing boom continues as KB Home reported forecast-beating third-quarter results yesterday and kept a positive outlook. US building permits are still rising and have around 20% more upside from current levels as family formation increases and permits swing back to the long-term average from 1960. Among North America home builders, we believe DR Horton is the most undervalued, with around 28% upside over the next 12 months.

Asian shares were mostly up this morning, following the leads from overseas. The ASX was also holding its own, with the only crack coming in the form of the AUD, which lost 0.6% based on third quarter gross domestic product which declined 0.5% from the prior quarter - the first contraction since 2011.

Like many interest-rate sensitive parts of the stock market, home builder stocks suffered in April as US interest rates rose due to the violent global bond sell-off. The bond smack-down, however, looks to have been overdone in the near-to-medium term, which should help home builder stocks to push higher.

A happy day for Home Depot shareholders, who can look forward to a USD 18 billion share buyback after the company posted fourth quarter profits that topped analysts’ estimates. Serge Berger takes a look at other companies set to gain from the rising US housing prices and how to trade them.